Essential Healthcare Stocks to Invest in for Long-Term Growth

While many companies offer products that may not be absolutely necessary, healthcare is an essential sector that every investor should consider. As global populations age, the healthcare industry is projected to expand significantly in the next decade and beyond. This growth makes healthcare stocks an attractive investment opportunity that can enhance your portfolio. If starting with a modest investment of around $1,500, here are three stocks in the healthcare sector that are worth purchasing and holding for the long haul (listed in alphabetical order).

1. AbbVie: Leading the Way in Biopharmaceuticals

Every successful pharmaceutical company confronts the challenge of a “patent cliff,” where lucrative drugs lose their exclusivity and face competition from generics and biosimilars. A prime example of effectively managing this hurdle is AbbVie (ABBV). When AbbVie was spun off from Abbott Labs in 2013, its flagship product, Humira, dominated sales as the world’s top medication for autoimmune diseases. Although the patent for Humira expired in the U.S. in 2023, AbbVie was well-prepared to transition.

The company invested heavily in research and development and made strategic acquisitions to diversify its product offerings. As Humira’s prominence wanes, AbbVie has successfully launched two high-growth successors, Rinvoq and Skyrizi. This proactive approach highlights AbbVie’s ability to thrive amidst obstacles, making it a solid investment choice. With shares trading at around $173 and a forward dividend yield of 3.8%, AbbVie also holds the prestigious title of a Dividend King, having increased its dividends consecutively for 52 years.

2. Intuitive Surgical: Innovating Robotic Surgery

For around $600 of your initial $1,500 investment, consider purchasing a share of Intuitive Surgical (ISRG). Since the launch of its da Vinci robotic surgical system in 2000, Intuitive Surgical has maintained a dominant position in the robotic surgery market.

This company is a prime example of the razor-and-blades business model, where a significant 84% of its revenue in 2024 came from recurring sources. These revenues mainly stem from replacement instruments for its da Vinci systems—a figure that has risen from 71% in 2017. Although I would typically be cautious with stocks trading at a forward earnings multiple of 76, Intuitive Surgical’s consistent growth rates in installed systems and procedure volumes justify this premium. With only 35% of potential soft tissue procedures currently using its technology, the growth potential is immense.

3. Vertex Pharmaceuticals: A Biotech Innovator

With your remaining funds, you can buy a share of Vertex Pharmaceuticals (VRTX), which currently trades at approximately $430. The company stands out due to its monopoly in treating cystic fibrosis (CF), a rare genetic disorder, significantly bolstered by its recent FDA approval for Alyftrek, its most advanced CF therapy.

Vertex is also expanding its pipeline with exciting products, including the early-stage launch of Casgevy, a gene-editing therapy. Additionally, it awaits imminent FDA decisions on suzetrigine, a non-opioid medication designed for acute pain relief. Vertex is positioned to diversify further with promising options in its late-stage pipeline, including treatments for kidney disease and potentially a cure for severe type 1 diabetes with zimislecel. The company’s capability to leverage successes in CF to venture into new therapeutic areas suggests a bright future for continued investor returns.

Conclusion: Embracing Healthcare Stocks for Your Portfolio

Investing in healthcare stocks not only offers you a stake in a vital sector but also presents opportunities for significant long-term growth. AbbVie, Intuitive Surgical, and Vertex Pharmaceuticals each exemplify adaptability and innovation, key traits that can yield impressive returns for investors. As the healthcare industry continues to expand, particularly with an aging population, these stocks could serve as excellent foundational assets in your investment portfolio. Take the time to consider these companies, and invest in your financial future with confidence.

Keith Speights holds positions in AbbVie, Intuitive Surgical, and Vertex Pharmaceuticals. The Motley Fool has positions in and recommends AbbVie, Abbott Laboratories, Intuitive Surgical, and Vertex Pharmaceuticals. For more details, please refer to The Motley Fool’s disclosure policy.